In addition, the
diesel fuel PPI soared 7% in July, although it was up only 2.5% over 12 months.
The PPI for inputs to construction industries, which unlike the materials index
includes diesel fuel, climbed 0.7% and 2.8%. Reflecting the relative importance
of diesel to different segments, the index for highway and street construction
inputs rose 1.3% and 4.1%; other heavy construction, 0.8% and 3.6%;
nonresidential buildings, 0.7% and 2.7%; multi-unit residential, 0.4% and 2.7%;
and single-unit residential, 0.4% and 2.2%.

The only significant
material with a large 12-month price increase was the PPI for hot-rolled bars,
plates and structural shapes, up 0.4% in July and 11.4% over 12 months. The
biggest decreases were for gypsum products, -3.7% and -20.2%; fabricated iron
and steel pipe, tube and fittings, -0.7% and -6.5%; insulation materials, -1.4%
and -4%; and asphalt felt and coatings, -1.8% and -0.7%.

The
consumer price index (CPI) for all
urban consumers was “virtually unchanged” in July, BLS said. The index, which
is now published with three-decimal instead of one-decimal precision, rose less
than 0.1% for the month, seasonally adjusted, and 2.4% over 12 months.

Since December 2003, when
construction materials prices started climbing, the CPI-U has risen 13%. The
PPI for construction inputs has climbed 29% and every significant construction
input index, except lumber and plywood and insulation materials, has risen more
than the CPI (an index commonly used by estimators and budget-setters to
project escalation). The CPI for urban
wage earners and clerical workers (CPI-W), used to adjust many construction
and other union contracts, rose 0.1% in July and 2.3% over 12 months.

“Lending standards for commercial real
estate loans were reportedly tightened further over the past three months,” the
Federal Reserve reported, summarizing a July survey of senior lending officers at
53 domestic and 20 foreign-owned banking institutions. “About one-fourth of
domestic institutions - a slightly smaller net fraction than in the previous
survey - and about 40% of foreign institutions indicated that they had
tightened lending standards on commercial real estate loans in the July survey.

Regarding demand, approximately one-fourth of domestic and foreign
institutions reported that demand for commercial real estate loans had weakened
over the past three months.” The Fed made a 50-basis-point cut in the discount rate that it charges banks for
short-term loans. So far, there has been no change in the Fed’s target for the federal-funds rate, the rate that banks
charge each other for overnight loans. Initial responses to the “question of the week”
accompanying the August 10 Data DIGest suggested no impact yet on
nonresidential construction from the turmoil in U.S. credit markets.

Industrial production (IP) at mines, utilities and factories
climbed 0.3% in July, seasonally adjusted, after rising 0.6% in June, the Fed
reported. The 12-month increase was 1.4%. Manufacturing IP was up 0.6% both
months and 2% over 12 months. IP of construction supplies fell 0.1% in July after rising 1.2% in June;
it fell 1.4% over 12 months. Capacity
utilization in manufacturing, which over time can indicate demand for new
factory construction, rose to 80.7% in July from 80.3% in June; the long-term
average is 79.8%.

Housing starts plunged 6.1% in July, seasonally adjusted, and 21%
over 12 months, the government reported. Single-unit starts sank 7.3% and 25%;
multi-unit, -1.6% and -0.3%. Building
permits, usually a reliable indicator of near-term starts, fell 2.8% and
23%, with single-unit permits down 1.6% and 24%, and multi-unit permits, -6.1%
and -19%. On Wednesday, the National Association of Home Builders reported that
its index of single-family homebuilders’
sentiment fell in August to the lowest level since January 1991.

“In
July, [seasonally adjusted] nonfarm
payroll employment increased in
26 states, decreased in 23 states
and the District of Columbia, and was unchanged in one state (Wisconsin),” BLS
reported. Compared to July 2006, employment increased except in Michigan,
-1.5%, and Ohio, -0.03%. The biggest 12-month percentage gains were in Utah,
4.8%; Kansas, 3.6%; Louisiana and Wyoming, 3.4% each; and Montana, 3.3%.
Nationally, employment rose 1.4%. Construction
employment
rose for the month in only 17 states plus DC, fell in 26 and was unchanged (or
within 100) in seven. Over 12 months, construction employment rose in 34
states, fell in 13 and was unchanged in three plus DC. The largest 12-month
percentage gains were in Utah, 14%; Wyoming, 9%; and Hawaii, 7%. The biggest
percentage losses were in Florida, -3%, and Michigan, -10%.

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